Word: cubanism
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...Cuban case is, in effect, a high-stakes game of he said-she said. But even if the SEC's version of events holds up in court, there is still a chance that the case could keep going. Stephen Bainbridge, a law professor at UCLA who has followed insider trading law for two decades and written a book on the topic, points out that the case law around whether or not a contract of confidentiality suffices for illegal insider trading "is not as clear as one would like." Some court findings, he says, suggest that it's not enough...
...Mark Cuban, the guy, is just a shareholder - he has no obligation," says Jonathan Macey, a professor of securities law and deputy dean at the Yale School of Management. "The critical question is if anything happened in that phone call that gave rise to a promise." Under an SEC rule adopted in 2000, if Cuban agreed to keep the information confidential, then he had a "duty of trust or confidence...
...case against Cuban comes down to whether or not he had a duty that he breached to Mamma.com, its CEO and its shareholders. That potential duty, one of "trust or confidence" in legal parlance, revolves around a phone conversation Cuban had in 2004 with Mamma.com's then CEO after the executive e-mailed Cuban to call as soon as possible. When Cuban did, he found out about the company's pending financing deal that would dilute existing shareholders. He promptly got rid of his shares before the information was made public...
What was actually said during the conversation is a point of contention. The SEC holds that Cuban was made aware of the sensitive nature of what was about to be told to him; that he understood he would have to keep it confidential; and that he still agreed to hear it. But the day after charges were filed, Cuban's attorney posted an entry on Cuban's blog bluntly saying, "There was no agreement to keep information confidential." The post also included a partial transcript of an exchange between Mamma.com's former CEO and Cuban's lawyer in which...
...brought charges against Cuban under a particular legal theory - but the legal theories around illegal insider trading have a long history of getting rewritten in the courts. "He's an interesting guy for them to have picked. He's not going to roll over and play dead," says Bainbridge. "If he wants to, he has the resources to take this case all the way up to the Supreme Court." If it comes to that, the case could take on real significance...